Universal Credit: childcare: Government Response to the Committee’s Twenty-Second Report Contents

The Report

Our Report

1.We published our Report on Universal Credit and childcare on 23 December 2018. Our inquiry heard evidence from parents, childcare providers and support organisations about difficulties with childcare payments under Universal Credit (UC). In some cases, these difficulties were so severe that parents who wanted to work were being prevented from doing so.

2.We received the Government’s response to our Report on 6 March 2019. We were disappointed by both its brevity and its content; it may well be the most skimpy and disappointing response we have ever received. It fails to engage with the Committee and with the recommendations that we put forward—after carefully weighing the evidence—to help improve the delivery of a Government policy.

3.Overall, the response gave the impression that the Government was simply dismissing the very serious problems that are plaguing parents who are trying to get into work. This was particularly disappointing given that the Government is relying on working mothers to contribute the vast majority of the additional hours of work expected under UC. We have taken the unusual step of producing a Report on the Government’s response in order to urge it to think again and to offer a more substantive response to our recommendations.

Developments since our Report

4.Shortly after the publication of our Report, on 11 January 2019, the Secretary of State made a speech at Kennington Jobcentre, setting out “a fresh approach to Universal Credit”.1 In that speech, she recognised the difficulties that UC’s systems for paying childcare costs could cause, saying:

Although UC’s provision of funding up to 85% of a claimant’s childcare costs is higher than its predecessor, this is paid in arrears only once actual costs are known.

So I recognise that this can cause financial difficulty, with some claimants struggling to pay upfront or report their costs on time.2

It was clear from this that the Secretary of State recognised that the additional support offered under Universal Credit would only make a real difference to parents if the structural and administrative problems were solved. She announced two changes to address the problems. First, she said that she had:

instructed jobcentres that if the initial month’s childcare costs prevent a claimant from starting work, the Flexible Support Fund should be used to help smooth the transition for this priority group.3

Second, she said that she had decided that the Department for Work and Pensions should be flexible when parents were unable to report their costs immediately.4

5.We wrote to the Secretary of State on 11 January to ask for more details about these announcements.5 In response, she told us that her instruction to Jobcentres was not a new policy. She explained that the Flexible Support Fund could already be used to help with upfront childcare costs, and indeed had been used in that way “for some time”.6 She did not believe, however, “that the policy was being implemented as intended”.7

6.We also asked for further details about the increased flexibility which the Secretary of State had described in her speech. She told us that the current system required parents to submit childcare receipts for reimbursement within the Universal Credit assessment period in which they were paid. It was, however, sometimes not possible for parents to do this. She explained:

To acknowledge this, we are refreshing our guidance, and trialling a more flexible approach in a number of areas. Once these pilots have concluded we will consider how to roll-out this approach further later in the year.8

The Government’s response to our Report

Media comment

7.The Department’s dismissive approach to our inquiry was evident shortly after we published our Report. The Department’s media spokesperson commented:9

This report doesn’t acknowledge that with Universal Credit childcare is more generous […] Working parents can claim back up to 85% of eligible costs, compared to 70% on the old system.

This fact was noted in the Report summary10 and was the subject of one of our conclusions and recommendations.11 As such, it was discussed extensively in the body of the Report.12 That the Department gave its initial response seemingly without the benefit of even a cursory glance at our Report is not good enough. It is disrespectful to the organisations and individuals who submitted thoughtful and detailed evidence on this point, and risks bringing into doubt amongst the general public the value of giving evidence to a select committee.

Direct payments to childcare providers

8.We recommended that the Government “develop Universal Credit’s systems to enable childcare costs to be paid directly to childcare providers”. Our recommendation aimed to:

In response to our recommendation, the Government said simply that it has “no plans” to make direct payments. It failed entirely to engage with our concerns, backed by extensive evidence, about parents struggling with prohibitively high upfront costs and about the impact on childcare providers. This is unacceptable.

Use of the Flexible Support Fund

9.The Flexible Support Fund (FSF) is a fund available to Jobcentres to help claimants with the costs of getting into work. In the course of our inquiry, the Flexible Support Fund was described by one witness as the “biggest secret in the Jobcentre”.13 Gingerbread, a charity supporting single parents, told us that it was “very common” for claimants to receive little or no information about the Flexible Support Fund from their Work Coach.14

10.Data supplied by the Department up to 2016–17 showed that, in the previous four years, only a very small proportion of FSF spending had gone towards childcare. The FSF has also been underspent each year. The Department could not supply data for 2017–18, which might have given a fuller picture of how the FSF is being used as UC rolls out. We concluded that:

The Department does not consistently gather and publish data on usage of the Fund. […] The failure to gather data means the Department cannot verify that the Fund is fulfilling its intended purposes. And it should not expect claimants, or the organisations supporting them, to take on trust that the Fund will meet their needs.15

To address this, we recommended that the Government publish a quarterly statistical update on the use of the Flexible Support Fund. The Secretary of State’s admission in January that Government policy on the Flexible Support Fund was not being implemented further serves to support the case for transparency.

11.In response, the Government said that it would not publish data on use of the FSF because it did not want “to introduce unnecessary administration on operational staff which may deter the use of this fund”. The Department did not explain what additional administrative burden would be created, nor how it had determined that this could deter Work Coaches from using the Fund.

12.The Government also said:

We do not publish financial data [about the Flexible Support Fund] as we do not wish to detract from the discretionary nature of this fund.

It is not at all clear to us what this statement means. If the Government does not want to use the FSF further, utilise the resource set aside for this Fund, or expand its capabilities, Ministers should be frank and open. As things stand, people who need help to get to work are not receiving it and Work Coaches seem unable or unwilling to access the FSF to help in the way we recommended. The Government must better explain what the barriers are.

Affordability

13.We found that some 100,000 households stood to receive less childcare support under UC than they would have under the legacy system. This includes households who are among the poorest UC claimants. We also heard that the maximum amounts that the Department will reimburse for childcare have not increased since 2005. This means that, for many claimants, their reimbursements would fall short of their needs. We concluded that it was simply unacceptable that households claiming UC—including some of the poorest in society—should be struggling with childcare costs while the Government was funding childcare support for households earning up to £200,000 per year via Tax Free Childcare and the 30 hours free childcare. We accordingly recommended that the Government “divert funding from the schemes aimed at wealthier parents […] towards Universal Credit childcare”.

14.In response, the Government said merely that it noted our recommendations. It then set out the amount it was spending on childcare and described its current childcare offer. We assume from this that it has actually rejected our recommendation. We would expect it to have observed the usual courtesy of explaining why it has done so.

15.The Government added that:

The childcarechoices.gov.uk. website provides an easy look up tool so parents can identify what they may be eligible for as well as offering support and advice about how to apply.

It is not clear why the Government’s Childcare Choices website is relevant to a recommendation urging it to divert funds from the wealthy to those who are most in need. This was also not a particularly helpful suggestion for claimants of UC, for whom only generic information is available on childcarechoices.gov.uk. The Government explained elsewhere in the response that its own Childcare Calculator cannot calculate Universal Credit entitlement, because it is “too complex to include this functionality in the calculator”.

Conclusions

16.The Secretary of State has acknowledged the very serious problems that structural flaws in Universal Credit are causing for parents who rely on childcare support to be able to work. This makes the Government’s curt and dismissive response to our recommendations all the more disappointing. Witnesses—including parents, charities and support organisations—gave up their time to contribute to our inquiry. They deserve much better treatment than this.

17.The Government should now review its response and provide a response which matches the consideration the Committee employed in an attempt to help parents to move into work, as the Government claims it is encouraging them to do. If the Government considers that the solutions we have recommended are not practicable, it should take the opportunity to explain and to set out alternative means of addressing those problems. In particular, we recommend that the Government explain:

(a) in the absence of plans to introduce direct payments, how it intends to address the serious difficulties that both parents and childcare providers are experiencing with the current system;

(b) the details of the pilots it is running to trial a more flexible approach to the provision of receipts for childcare costs, including where these pilots are being run, what options for providing evidence of childcare costs are being trialled, when the pilots started, how long they will run for and how they will be monitored;

(c) why it is so difficult to publish information about the use of the Flexible Support Fund, what analysis it has done of the additional administrative work that would be created, and if it will be published in full;

(d) its view on our recommendation that it should divert funding from the schemes aimed at wealthier parents (Tax Free Childcare and the 30 hours free childcare) towards Universal Credit childcare to help more people into work. The Department should also commit to providing, in consultation with other relevant Departments, an analysis of the Government’s spending on the 30 free hours free childcare by income decile, to show which households are benefiting from this policy. This should be in addition to, or in combination with, the analysis on the impact of UC childcare cost caps that the Department has undertaken to provide in summer 2019.


1 Department for Work and Pensions, Press release: Amber Rudd sets out fresh approach to Universal Credit, 11 January 2019

2 Department for Work and Pensions, Speech: Universal Credit: personal welfare, 11 January 2019

3 Department for Work and Pensions, Speech: Universal Credit: personal welfare, 11 January 2019

4 Department for Work and Pensions, Speech: Universal Credit: personal welfare, 11 January 2019

5 Letter from the Chair to the Secretary of State for Work and Pensions, 11 January 2019

6 Letter from the Secretary of State to the Chair, 31 January 2019

7 Letter from the Secretary of State to the Chair, 31 January 2019

8 Letter from the Secretary of State to the Chair, 31 January 2019

10 Work and Pensions Committee, Twenty-Second Report of Session 2017–19, Universal Credit: childcare, HC 1771, summary

11 Work and Pensions Committee, Twenty-Second Report of Session 2017–19, Universal Credit: childcare, HC 1771, para 46

12 Work and Pensions Committee, Twenty-Second Report of Session 2017–19, Universal Credit: childcare, HC 1771, chapter 3

13 Q876 (Lucy Collins)

14 Q849 (Dalia Ben-Galim)

15 Work and Pensions Committee, Twenty-Second Report of Session 2017–19, Universal Credit: childcare, HC 1771, para 34




Published: 11 April 2019